Google Pulls the Trigger on China

In short: Google.cn now redirects to Google.com.hk, where mainland users can get uncensored search results.

Aside from the fact that this will in all likelihood only last for a few hours until the Great Firewall "fixes" it, how would we monkeys profit from this?

Some ideas:
The obvious - Buy Chinese Internet - probably overdone already, esp on BIDU. But you also have SOHU and, to a lesser degree, SINA. A wildcard here is MSFT (Bing China). AND, if you can trade HK-listed, Tencent is another possible winner.

The also obvious - Short GOOG. A bit dangerous, but self-explanatory.

The tin-foil hat - Double-down on TBT (UltraShort 20+ Year Treasuries) and TBT calls. China angry --> China dumps enough UST just to make it felt without really hurting themselves, or even just further reduces pace of purchases.

Of course, by no means is this an exhaustive list...

Region

WSO Elite Modeling Package

  • 6 courses to mastery: Excel, Financial Statement, LBO, M&A, Valuation and DCF
  • Elite instructors from top BB investment banks and private equity megafunds
  • Includes Company DB + Video Library Access (1 year)

Comments (23)

Mar 22, 2010 - 4:46pm

Google had a really tiny presence in China so I really don't think that its that big a deal for them. BIDU is the dominant Chinese player.

Good for Google. China and their hacking is bullshit.

Mar 22, 2010 - 4:51pm

Yeah, China wasn't that big to their business - will be interested to see if some "enterprising" lawyer files a wso/">suit on behalf of a bunch of pissed off shareholders anyway. While BIDU is obviously dominant currently, Tencent come out of this as a winner - QQ is so far ahead of other IM services in terms of share over there, it's not unreasonable for them to just stick a searchbar in their client to drive traffic.

I do agree it's nice to see Google take a stand, what with "don't be evil" and all.

  • 1
Mar 22, 2010 - 6:35pm

This is absolutely retarded from a business perspective...

The Macro View http://themacroview.wordpress.com
Mar 22, 2010 - 6:47pm

Not a tiny presence in China overall (36% of the search market, behind Baidu's 58%), but definitely a tiny percentage of Google's overall revenue (~ 1 to 2%). In the long run, it will probably be costly for Google since the Chinese search market is growing by about 40% a year.

Let's not all jump aboard the Google Freedom Fighter bandwagon yet. If you'll recall, Google chose to voluntarily censor Google.cn in compliance with Chinese law. They weren't exactly the most morally principled from the onset.

Learn More

300+ video lessons across 6 modeling courses taught by elite practitioners at the top investment banks and private equity funds -- Excel Modeling -- Financial Statement Modeling -- M&A Modeling -- LBO Modeling -- DCF and Valuation Modeling -- ALL INCLUDED + 2 Huge Bonuses.

Learn more
Mar 22, 2010 - 7:06pm

True.

I agree with your point here:

whateverittakes:
If you'll recall, Google chose to voluntarily censor Google.cn in compliance with Chinese law. They weren't exactly the most morally principled from the onset.

It's more appropriate to observe this event unfolding with regards to Google's strategic objectives, rather than its moral stance.

Mar 22, 2010 - 6:50pm

Google's growth was stagnating in China compared to its rival Baidu. From a business standpoint the company is able to engender goodwill in its mainstream 'audience', which may do more good for its brand in the long run.

And with the redirecting of internet traffic, this move may not affect them that much financially.

Mar 22, 2010 - 7:04pm

I wouldn't short Google. I'm sure Google has enough smart Harvard and Stanford MBAs to keep growing in the future

========================================= We are excited to formally extend to you an offer to join Bank of Ameria
Mar 22, 2010 - 7:08pm

I have a question, probably going to be pretty stupid, but how tough is this vaulted Chinese firewall. I mean can you just slap a proxy in IE and do whatever you want? If people in Iran are getting around the sensors then it can't be that hard for the normal Chinese computer user to do it.

I'll agree with the above, Google really needs to push this issue. There is a lot of negative Chinese sentiment right now and they could really capitalize on it.

  • 1
Mar 22, 2010 - 7:25pm

Proxies are hit or miss, but generally work pretty well. It's very common to be using a proxy for about 20 minutes and then it doesn't work anymore (I don't know if this is the case in other nations with censorship), but about 20 new proxies pop up for every one that shuts down. So it's very easy, they are easy to find, too.

  • 1
Mar 22, 2010 - 7:26pm

lol I remember back in the day, before I even had an account, using a proxy to get WSO because it takes forever to access this site in China without one

Best Response
Mar 22, 2010 - 7:31pm

China was just trying to reverse engineer Google. I'm glad they got out of there. Commie fuckers (China, not Google).

For me, I'm not worried about China's treasury holdings. Honestly, where else would they put their money? Speculate on oil? Buy a bunch of gold? Hell no. There is no current substitute for US sovereign debt so we basically have them by the balls. What we have to remember is WE HAVE THEIR MONEY. They have little pieces of paper. No we're not about to default on our debt, but shit, if China started warring around you think they'd ever see a dime of it? Hell no. Also, the debt is denominated in dollars so they are scared as shit that their $1 trill or so will devalue when the US forces the yuan to appreciate. Listen to the news. The trade hawks are swirling. On April 15th, China will be declared a currency manipulator and then we'll see what sanctions we'll take. And don't think the world won't back us on this. They all have an interest in the dollar too. Personally, I think this is about to get ugly and I don't think it will end well for China. At some point the lack of a US manufacturing base becomes a national security issue. If it takes a little economic hardball to get it back, then that's just what we'll do.

Mar 22, 2010 - 7:40pm

Well yeah, China, because of their currency policies, has a dollar problem, haha. What do you do with a shitload of dollars when your currency is pegged to them? There are people who can explain it better than I, but basically they sterilize the growing money supply and combat inflation by printing yuan, purchasing Treasuries and then issuing PBOC notes. Whether the US can force the yuan to appreciate is another question - the last time we did that was Japan, and it didn't end too well for them - don't think China doesn't know that history. Unless we tariff all imports, our manufacturing will simply move to other countries with lax regulation and low wages more than happy to take up China's slack.

  • 2
Mar 22, 2010 - 7:32pm

Agree with above, proxies are definitely out there and can work fairly well. There's even an industry in China selling VPN access (something like an encrypted proxy) for users to bypass the firewall. On top of that, if you have friends outside China (or hack a computer outside China as the case might be), you can run an SSH server which doubles as a proxy...

Lots of ways to get around firewalls. By the way, major Google properties were already blocked in China before this episode even started, including Youtube and Blogger, so it's not as if Google/China was copacetic before this.

  • 1
Mar 22, 2010 - 9:12pm

johoratio you are an idiot if you think escalating a "trade war" with China by calling it a currency manipulator is a prudent move. The United States need China far more than China needs the United States. The more the US criticizes the Chinese over their currency policy the less likely they are to do anything about it. Any sanctions against China would also be suicidal for US growth.

The Macro View http://themacroview.wordpress.com
Mar 23, 2010 - 8:23am
themacroguy:
johoratio you are an idiot if you think escalating a "trade war" with China by calling it a currency manipulator is a prudent move. The United States need China far more than China needs the United States. The more the US criticizes the Chinese over their currency policy the less likely they are to do anything about it. Any sanctions against China would also be suicidal for US growth.

Commie. :)

Mar 22, 2010 - 9:16pm

While I agree that we should tread softly with China and realize that they are an independent nation with their own problems to take care of rather than our personal slave I think we are equally inter twined. The USSR and USA kept that status quo with nuclear weapons and MADD policy, well that has been replaced with an economic MADD policy. China would face internal collapse and mayhem if they lost their biggest trading partner and visa versa. What needs to happen is US politicians need to make hard decisions at home and suck it up instead of trying to cajole the Chinese into allowing us to spend spend spend.

  • 2
Mar 23, 2010 - 7:46pm

Voluptatem sapiente est officiis in. Id rerum est ullam dolores necessitatibus et sapiente. Amet et enim laboriosam adipisci. Dolor modi vel corporis nostrum. Architecto tempore mollitia officia eaque in nihil.

Ut ducimus est perspiciatis quaerat consequatur fuga. Ut praesentium neque ipsum molestias. Non impedit qui laboriosam.

Start Discussion

Total Avg Compensation

September 2021 Investment Banking

  • Director/MD (10) $853
  • Vice President (38) $367
  • Associates (218) $232
  • 2nd Year Analyst (132) $153
  • 3rd+ Year Analyst (30) $147
  • Intern/Summer Associate (102) $144
  • 1st Year Analyst (483) $135
  • Intern/Summer Analyst (375) $82